2024 Finance Act – FBR New Withholding Tax Rates On Property Transactions 236C & 236K
Important Update for Real Estate Investors and Buyers in Pakistan: New Withholding Tax Rates on Property Transactions
This blog post is intended to inform you about the recent changes to withholding tax rates on property sales and transfers in Pakistan. These new rates are effective as of July 1, 2024, and they apply to both buyers and sellers of real estate.
What is withholding tax on property transactions?
Withholding tax is a tax that is deducted at the source of income. In the case of property transactions, the withholding tax is deducted by the registrar at the time of registration or attestation of the property. The tax is then deposited with the government.
What are the new withholding tax rates?
The new withholding tax rates are based on the fair market value or FBR Property Valuations of the property or the gross consideration received, whichever is higher. The rates are as follows:
Advance Tax On Sale Or Transfer Of Immovable Property Under Section 236C
Where the gross amount of the consideration received does not exceed Rs.50 million: 3% for person in ATL, 6% for person not in ATL and 8% for person in ATL who filed return after due date.
Where the gross amount of the consideration received exceeds Rs.50 million but does not exceed Rs.100 million: 3.5% for person in ATL, 7% for person not in ATL and 8% for person in ATL who filed return after due date.
Where the gross amount of the consideration received exceeds Rs.100 million: 4% for person in ATL, 8% for person not in ATL and 10% for person in ATL who filed return after due date.
Advance Tax On Purchase Of Immovable Property Under Section 236K
Where the fair market value does not exceed Rs.50 million: 3% for person in ATL, 12% for person not in ATL and 6% for person in ATL who filed return after due date.
Where the fair market value exceeds Rs.50 million but does not exceed Rs.100 million: 3.5% for person in ATL, 16% for person not in ATL and 7% for person in ATL who filed return after due date.
Where the fair market value exceeds Rs.100 million: 4% for person in ATL, 20% for person not in ATL and 8% for person in ATL who filed return after due date.
What do these changes mean for you?
If you are planning to buy or sell property in Pakistan, you will need to be aware of the new withholding tax rates. These rates can affect the amount of cash that you will have available at closing.
For example, if you are selling a property for Rs.70 million, the buyer will be required to withhold Rs.2.45 million (3.5% of Rs.70 million) and deposit it with the government. This means that you will only receive Rs.67.55 million at closing.
New Holding Tax Rates for Properties in Pakistan
This blog post is intended to inform you about the holding tax rates for properties in Pakistan. The tax rates are based on the type of property and the holding period.
Holding Tax Rates for Open Plots
The holding tax rate for open plots is 15% if the holding period does not exceed one year. The rate decreases to 12.5% if the holding period exceeds one year but does not exceed two years. The rate continues to decrease as the holding period increases. For example, the holding tax rate for open plots is 2.5% if the holding period exceeds five years but does not exceed six years.
Holding Tax Rates for Constructed Flats
The holding tax rate for constructed flats is also 15% if the holding period does not exceed one year. However, the rate decreases more steeply for constructed flats than for open plots. For example, the holding tax rate for constructed flats is 0% if the holding period exceeds three years.
At Mohsin Estate, we are committed to providing our clients with the latest information on the real estate market in Pakistan. We can help you understand the new withholding tax rates and how they will affect your transaction. We can also help you with all aspects of the buying and selling process, from finding the right property to negotiating the sale price.
Contact us today to learn more about how we can help you achieve your real estate goals.
Disclaimer: The information in this blog post is for general informational purposes only and does not constitute legal advice. Please consult with a qualified tax advisor for advice on your specific situation
